Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd

Nature of the application

1. By Originating Process filed on 3 April 2021, the Plaintiff, Matrix Group Pty Limited ("Matrix") applies to set aside a creditor's statutory demand dated 15 March 2021 ("Demand") served by the Defendant, TPS Group Services Pty Limited ("TPS"). The application was conducted with admirable efficiency by Mr Pokoney, who appeared for Matrix, and by Mr Patterson, solicitor, who appeared for TPS. Each of them is to be congratulated for their focus on the key issues in dispute, which will, undoubtedly, have saved time and costs for their respective clients in dealing with the matter.
2. The Demand claims the amount of $40,000 which is described as "the acknowledgment of debt relating to subcontractor works performed by [TPS] to [Matrix] for the project known as Northbridge Bowling Club during December 2020 and January 2021". The Demand therefore relies on the existence of an acknowledgment of the debt said to have been provided by Matrix in favour of TPS.
3. The Demand is verified by an affidavit dated 15 March 2021, sworn by Ms Ayad, the sole director of TPS, which sets out the background to the Demand, arising from entry by TPS into a subcontractor agreement with Matrix on a project known as the Northbridge Bowling Club, and states that TPS was retained to provide electrical services to Matrix in its capacity as head contractor. The affidavit records that, on 31 January 2021, TPS issued an invoice to Matrix for works performed between December 2020 and January 2021, claiming an amount of $46,485.45 and, critically, that Matrix "agreed to resolve the invoice for payment in the sum of $40,000 by 5 March 2021", and "[TPS] accepted this proposition." The affidavit, in turn, states, by reference to that resolution, that the debt is not in dispute. The Demand does not there rely on an amount arising by reference to a reasonable amount payable for the work done, or an amount referrable, directly, to the costs of that work, but relies on the acknowledgment of that debt. The affidavit, in turn, annexes the document described as the acknowledgment to pay the debt, which is a payment schedule issued by TPS under s 14 of the Building & Construction Industry Security of Payment Act 1999 (NSW) ("SOPA") approving for payment an amount of $40,000. I also note, for completeness, that no submission was made by either party that the SOPA had any direct application in respect of the debt, and no judgment has been issued arising from any adjudication under the SOPA. The affidavit then addresses a number of other matters, and contains the statement required in respect of a verifying affidavit that the debt owed to TPS is due and payable and that, at the date of executing the affidavit, no payment has been received by TPS in respect of the debt.
4. In seeking to set aside the Demand, Matrix relies on the affidavit of its director, Mr Loh, which refers to the engagement of TPS in respect of works and to payment claims made by TPS for works said to have been completed in December 2020 and January 2021. Mr Loh refers to Matrix having responded to the invoice issued by TPS with a payment schedule under the SOPA specifying an amount of nil payable, which Mr Loh claims reflected incomplete and non-compliant works by TPS. There has been no issue in this application as to whether those works were incomplete or not compliant and no question arises in that respect. Mr Loh refers to a further payment schedule issued by Matrix on 18 February 2021, again, assessing the amount payable by Matrix to TPS as nil.
5. Mr Loh then refers to an email exchange with the Operations Manager of TPS, Mr El Debel, on 23 February 2021 and Mr Loh contends that he made an offer to Mr El Debel, to which Mr El Debel agreed at 9.26 am. That is a reference to an email at 9.11 am, by which Mr Loh suggested that he would adjust TPS's claim to $40,000, "two conditions, you are to return to site as early as tomorrow or as [third party] requires and you remove the payment default against Matrix". Mr El Debel responded at 9.26 am that: "We have never not confirmed our intent to complete the project. We simply wants [sic] what should've been fairly scheduled to be done correctly and fairly".
6. That email requests the submission of a revised schedule and date for payment as the first Friday of March and indicates that the default would be removed once payment was scheduled and agreed to.
7. Mr Loh then refers to the issue of the payment schedule for $40,000, which he contends he would not have issued but for the "agreement" reached in the emails on 23 February 2021. His evidence is that TPS then did not return to the site or complete the works under the subcontract agreement, and Matrix subsequently issued a notice to TPS indicating that it would take over those works, and he refers to a subsequent adjudication application made by TPS which was withdrawn.
8. I note, for completeness, that an exchange of text messages also appears to have occurred, likely at about the same time as the emails, where TPS indicated that it wanted payment scheduled and paid on the date promised; Mr Loh responded, again referring to a requirement or a request that "you commit to me and complete all works outstanding and provide certification"; TPS requested a revised payment claim; Mr Loh responded that he would send an email seeking a response "regarding your commitment to returning" and would have the claim scheduled, revised at $40,000; and TPS responded saying, "This isn't a negotiation", and expressing confidence in the fact that it would recover the funds eventually.

The parties' submissions

1. With that factual background, the parties have addressed the question whether a genuine dispute arises and, in particular, the status of any conditions attached to the Payment Schedule issued by Matrix. It seems to me that the real question which arises in the application, implicit in the parties' submissions, is whether it is seriously arguable that the issue of the Payment Schedule, in the relevant circumstances, did not amount to an acknowledgment of debt supporting the claim for the $40,000 that was unconditional and binding in character, so that there is a genuine dispute as to that matter which would support an order setting aside the Demand.
2. Mr Pokoney, who appears for Matrix, refers to the case law concerning an application to set aside a creditor's statutory demand, to which I will return below. He submits that the exchange of text messages and emails, to which I have referred above, on its proper construction, constituted an agreement by which Matrix would pay the sum of $40,000 to TPS, subject to two conditions, namely, that TPS return to site and complete the project and that the payment default be removed. As the outline of events to which I have referred above indicates, Mr Loh had, at least twice, sought confirmation of those matters in the emails between the parties. Mr Pokoney, in turn, refers to Mr Loh's evidence that TPS did not return to site, and submits that there is a genuine question whether, on the proper construction of the agreement between the parties, the return to site or resumption of work was an agreed term which needed to be satisfied in order to give rise to a right to payment on the part of TPS, and what was the effect of the failure to satisfy that condition. Mr Pokoney also advances submissions as to the way in which any contract, in that respect, would be construed and as to the significance of a "condition" within a commercial agreement, in order to seek to establish that there is a genuine dispute as to that matter. I pause to note that the relevant question may be a simpler one, because, ultimately, the Demand does not rely upon a contract for the payment of the amount, but on a contention that there was an "acknowledgment" that a debt in that amount was due. The question then arises as to whether such an acknowledgment existed, in unconditional terms, so as to support the Demand.
3. Mr Patterson, solicitor, responds that the emails of 23 February 2021 do not give rise to a conditional agreement and that there is no serious question to be tried in that respect. He submits that a bare denial by Matrix of liability for the amount claimed is insufficient to give rise to a serious question as to the amount claimed; however, that may misapprehend the question in issue, which is whether a serious question has been raised as to the basis on which TPS claims the amount, namely, that there was an unconditional "acknowledgment" of the debt.

The relevant case law

1. Turning now to the relevant case law, the Court has power to set aside a creditor's statutory demand under s 459H(1)(a) of the Corporations Act 2001 (Cth) where there is a genuine dispute about the existence or amount of the debt to which a creditor's statutory demand relates. In Spencer Constructions Pty Ltd v G&M Aldridge Pty Ltd (1997) 76 FCR 452 at 464; (1997) 147 ALR 444; (1997) 24 ACSR 353; [1997] FCA 681, the Full Court of the Federal Court observed that a genuine dispute must be bona fide and truly exist in fact, and the grounds for the dispute must be real and not spurious, hypothetical, illusory or misconceived. The Courts have repeatedly recognised that the threshold to establish a genuine dispute is not high and, in Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2) [2003] NSWSC 896 at [18], Barrett J observed that: "Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. The court does not engage in any sort of balancing exercise between the strengths of competing contentions. If it sees any factor that, on rational grounds, indicates an arguable case on the part of the company, it must find that a genuine dispute exists, even where any case apparently available to be advanced against the company seems stronger."
2. The Court of Appeal, in turn, summarised the case law, albeit in the context of dealing with offsetting claims, in Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd (2013) 85 NSWLR 601; [2013] NSWCA 344, and I also did so in Re Wollongong Coal Pty Ltd (2015) 110 ACSR 134; [2015] NSWSC 1680 at [9] and [22], in observations which were approved by Barrett JA in the Court of Appeal in Ligon 158 Pty Ltd v Huber (2016) 117 ACSR 495; [2016] NSWCA 330 at [8]. I there noted that the principles were analogous to those which underpin an application for an interlocutory injunction or summary judgment; that the task of the applicant seeking to establish a genuine dispute was not a difficult or demanding one, and that the Court merely determines the existence of such a dispute in an application of this kind. A similar approach was adopted by the Court of Appeal in Grandview Ausbuilder Pty Ltd v Budget Demolitions Pty Ltd (2019) 99 NSWLR 397; (2019) 136 ACSR 563; [2019] NSWCA 60 where, importantly, the Court of Appeal also emphasised that the Court would not generally determine questions of construction, in seeking to determine whether a genuine dispute existed, where to do so could cause embarrassment for a judge who was subsequently asked to determine such questions, on their merits, in substantive proceedings.

Determination

1. Here, it seems to me that a genuine dispute plainly exists as to the existence of the debt claimed, although I accept that Mr Patterson may well be correct that, if a debt existed, there would be no dispute as to the amount that was contemplated by the discussion between the parties. It seems to me that that genuine dispute can be formulated in one of two ways. The first, to which Mr Pokoney gives primary emphasis, is that any debt arises from a contract between the parties and it is at least seriously arguable that the consideration for Matrix's acceptance that an amount of $40,000 was due to TPS was a commitment by TPS to return to site and complete the relevant works. The second basis of a genuine dispute is, in my view, more straightforward. The Demand turns upon the existence of an "acknowledgment" of the debt of $40,000, relying upon the issue of the payment schedule, and treats that "acknowledgment" as unqualified. It seems to me that there is plainly a serious question to be tried as to whether that "acknowledgment" was qualified by the surrounding communications, and whether it was given in the context of TPS's commitment to return to site or, as TPS formulated it, in the absence of any suggestion that it would not return to site in those circumstances.
2. I emphasise that, in finding a genuine dispute is established, I reach no view as to the merits of that dispute, which is not the Court's role in an application of this kind. As Mr Pokoney pointed out, the consequence of the conclusion I reach is only that TPS must bring any claim in a relevant amount in substantive proceedings, where the dispute as to the terms of the agreement reached between the parties or any "acknowledgement" can be determined upon the evidence rather than proceeding in a summary determination of an application to set aside the Demand.

Orders

1. For these reasons, I order that:
2. The creditor's statutory demand dated 15 March 2021 issued by TPS Group Services Pty Ltd to Matrix Group Co Pty Ltd be set aside.
3. The Defendant pay the Plaintiff's costs of the application, as agreed or as assessed.

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